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Well, I mean, the greatest economic booms in American history happened when our money was backed by gold. When the dollar came off the gold standard in the 70s

Well, I mean, the greatest economic booms in American history happened when our money was backed by gold. When the dollar came off the gold standard in the 70s, we saw wages decouple from productivity. This is not a coincidence.

skookumchuck 9y ago
Most people who claim that fiat money is essential for a growing economy are unable to explain the US economy from 1800-1914. The real purpose of fiat money systems is so the government can spend more than it takes in by printing the difference (or the more modern variation of just creating it with accounting gimmicks).
- ethbro 9y ago
  The real point of fiat money is that it affords a government the option to increase the money supply at will. Whether they do that for good (e.g. to attempt to combat a recession) or for evil (e.g. to invalidate government debt / inflate their way out of deficits) is a political exercise. And knowing that, I actually think the US Fed is a pretty decent system. I shudder to think what would happen if Congress controlled monetary supply.
  - skookumchuck 9y ago
    An 1800 dollar is worth the same as a 1914 dollar. A 2018 dollar is worth about 4 cents.
    - bildung 9y ago
      That is wrong in multiple dimensions. First, that the dollar in 1800 had the same worth as in 1914 is pure coincidence. Relative to 1800, it was - 20% less in 1798 - 60% more in 1814 - 40% less in 1840s - 50% more in the 1850s and so on. source: http://liberalarts.oregonstate.edu/sites/liberalarts.oregonstate.edu/files/polisci/faculty-research/sahr/inflation-conversion/pdf/price-levels_1774-2012_logarithmic.pdf http://liberalarts.oregonstate.edu/sites/liberalarts.oregons... Second: incomes changed. The dollar worth alone is meaningless without lookiing at the purchasing power of the population. In 1800, a farm worker earned 12$ a month, which are $300 in 2018 dollars, so today's farm workers obviously earn more, regardless of the dollar's value. (source: https://babel.hathitrust.org/cgi/pt?id=wu.89071501472;view=1up;seq=62 https://babel.hathitrust.org/cgi/pt?id=wu.89071501472;view=1...)
      - freejulian 9y ago
        I don’t think anyone claimed the value of a dollar was constant. Even on the gold standard there were periods of inflation and deflation. The average value over time was stable though.
        skookumchuck 9y ago
        That's right, it averaged out to net zero over more than a century. Afterwards, it steadily declined in value to 4 cents. It's a fundamentally different behavior, both in direction and magnitude.
        bildung 9y ago
        > That's right, it averaged out to net zero over more than a century. It just averages out because you selected an arbitrary period, which makes the point essentially meaningless. Id didn't average out from 1800 to 1900, from 1814 to 1914, from 1800 to 1850 and so on. > It's a fundamentally different behavior, both in direction and magnitude. Again, this is not correct. If you look at the actual data, you can see that the the inflationary periods in the 20th century actually have smaller inflation per year than those in the 19th century. The fundamental difference is the absence of severe deflationary crises, of which there were plenty in the 19th century. The top ten highest inflation rates of the last 200 years were all in the 19th century. Have a look at the data: http://www.in2013dollars.com/1800-dollars-in-2016 http://www.in2013dollars.com/1800-dollars-in-2016
        bildung 9y ago
        No, it wasn't stable. I have linked the actual data, please have a look. It was only stable if you select arbitrary time periods to make it look stable.
        freejulian 9y ago
        Looks to me like it fluctuates around a specific level... which is pretty much what I said: periods of inflation and deflation.
AnimalMuppet 9y ago
Yes, and when there was free land available, and when the economy was small so growth was easier to achieve as a percentage, and when immigration was at levels that would be politically unthinkable today. So "This is not a coincidence" seems to be rather overstating the certainty of what the cause was.

skookumchuck 9y ago

Most people who claim that fiat money is essential for a growing economy are unable to explain the US economy from 1800-1914. The real purpose of fiat money systems is so the government can spend more than it takes in by printing the difference (or the more modern variation of just creating it with accounting gimmicks).

ethbro 9y ago
The real point of fiat money is that it affords a government the option to increase the money supply at will. Whether they do that for good (e.g. to attempt to combat a recession) or for evil (e.g. to invalidate government debt / inflate their way out of deficits) is a political exercise. And knowing that, I actually think the US Fed is a pretty decent system. I shudder to think what would happen if Congress controlled monetary supply.
- skookumchuck 9y ago
  An 1800 dollar is worth the same as a 1914 dollar. A 2018 dollar is worth about 4 cents.
  - bildung 9y ago
    That is wrong in multiple dimensions. First, that the dollar in 1800 had the same worth as in 1914 is pure coincidence. Relative to 1800, it was - 20% less in 1798 - 60% more in 1814 - 40% less in 1840s - 50% more in the 1850s and so on. source: http://liberalarts.oregonstate.edu/sites/liberalarts.oregonstate.edu/files/polisci/faculty-research/sahr/inflation-conversion/pdf/price-levels_1774-2012_logarithmic.pdf http://liberalarts.oregonstate.edu/sites/liberalarts.oregons... Second: incomes changed. The dollar worth alone is meaningless without lookiing at the purchasing power of the population. In 1800, a farm worker earned 12$ a month, which are $300 in 2018 dollars, so today's farm workers obviously earn more, regardless of the dollar's value. (source: https://babel.hathitrust.org/cgi/pt?id=wu.89071501472;view=1up;seq=62 https://babel.hathitrust.org/cgi/pt?id=wu.89071501472;view=1...)
    - freejulian 9y ago
      I don’t think anyone claimed the value of a dollar was constant. Even on the gold standard there were periods of inflation and deflation. The average value over time was stable though.
      - skookumchuck 9y ago
        That's right, it averaged out to net zero over more than a century. Afterwards, it steadily declined in value to 4 cents. It's a fundamentally different behavior, both in direction and magnitude.
        bildung 9y ago
        > That's right, it averaged out to net zero over more than a century. It just averages out because you selected an arbitrary period, which makes the point essentially meaningless. Id didn't average out from 1800 to 1900, from 1814 to 1914, from 1800 to 1850 and so on. > It's a fundamentally different behavior, both in direction and magnitude. Again, this is not correct. If you look at the actual data, you can see that the the inflationary periods in the 20th century actually have smaller inflation per year than those in the 19th century. The fundamental difference is the absence of severe deflationary crises, of which there were plenty in the 19th century. The top ten highest inflation rates of the last 200 years were all in the 19th century. Have a look at the data: http://www.in2013dollars.com/1800-dollars-in-2016 http://www.in2013dollars.com/1800-dollars-in-2016
      - bildung 9y ago
        No, it wasn't stable. I have linked the actual data, please have a look. It was only stable if you select arbitrary time periods to make it look stable.
        freejulian 9y ago
        Looks to me like it fluctuates around a specific level... which is pretty much what I said: periods of inflation and deflation.

AnimalMuppet 9y ago

Yes, and when there was free land available, and when the economy was small so growth was easier to achieve as a percentage, and when immigration was at levels that would be politically unthinkable today. So "This is not a coincidence" seems to be rather overstating the certainty of what the cause was.